Laurentide Union Bank Is Expected to Pay a Dividend of $4.20

question 54

Multiple Choice

Laurentide Union Bank is expected to pay a dividend of $4.20 per share in one year.The dividend is expected to grow at a rate of 5 percent forever.If the current market price for a share of Laurentide Union Bank is $40,what is the cost of equity?

• A) 5.00%
• B) 9.52%
• C) 10.50%
• D) 15.50%

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Definitions:

Analogous

Similar or comparable in certain aspects, typically in a way that allows for a comparison or analogy to be made between different things.

Uniformitarianism

The principle that the same natural laws and processes that operate in the universe now have always operated in the universe in the past and apply everywhere.

Catastrophism

The theory that Earth has been affected in the past by sudden, short-lived, violent events, possibly worldwide in scope.

Evolution

The process by which different kinds of living organisms are thought to have developed and diversified from earlier forms during the history of the earth.